Rice suggested that if the two sides were to meet, she would reiterate US calls on Iran to stop aiding fighters in Iraq.

"What do we need to do? It's quite obvious," Rice told ABC television in the US.

"Stop the flow of arms to foreign fighters. Stop the flow of foreign fighters across the borders... Stop stirring up trouble among militias that then go and kill innocent Iraqis. It's quite clear what needs to be done."

Tehran said it would send a delegation led by Mottaki "with the aim of helping the Iraqi nation and government".

Battleground

The announcement of Iran's participation followed weeks of intense lobbying by Baghdad, which had sought to persuade Iran to take part despite Tehran's anger over the detention by US forces of five Iranians in northern Iraq in January.

Hoshiyar Zebari, Iraq's foreign minister, said there was a "high possibility" that Iran and the US would hold bilateral talks and said any meeting between the two sides "would be a major breakthrough and any reduction in tensions will positively impact the situation in Iraq".

"We don't want Iraq to be a battleground for settling scores on other agendas at our cost. Really, this has been harming us, damaging us a lot."

The conference will also bring together officials from G8 nations, the European Union and Iraq's neighbours, including Syria and Turkey.

A report by the US congress-commissioned Iraq Study Group this year recommended talks with Syria and Iran to help stabilise Iraq.

But the Bush administration has taken no concrete steps to engage Iran.

In fact, the relationship has worsened, with the five Iranians being detained by the US and Iran announcing plans to further enrich uranium despite UN Security Council sanctions.

Iranian officials reject preconditions as the basis for any bilateral talks, and say that the US has not given them the respect they deserve.

Saudi snub

Meanwhile, King Abdullah of Saudi Arabia has turned down a request to meet Nuri al-Maliki, Iraq's prime minister.

Zebari confirmed the refusal but denied it was a snub.

He said a Washington Post report that Abdullah had refused to receive al-Maliki before the Sharm el-Sheikh regional summit because the Sunni leader was sceptical of al-Maliki's Shia was "not true".

"This time the Saudi king, his schedule was not suitable for this timing," Zebari said.

"So they did not decline it, but they said the king has an internal tour which he does every now and again. So we couldn't agree on the timing."

Rice said the Egypt conference would offer al-Maliki the chance to make the case for his government.

"There's no doubt that the Saudi government has concerns about the process of reconciliation in Iraq," she said.

She said al-Maliki could show neighbouring countries at the conference, "what also needs to be demonstrated to the Iraqi people, that this government is behaving in an even-handed fashion".